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on Evolutionary Economics |
| By: | Berninghaus, Siegfried K.; Todorova, Lora; Vogt, Bodo |
| Abstract: | This paper presents results from an experiment designed to study the effect of self reporting risk preferences on strategy choices made in a subsequently played 2x2 coordination game. The main finding is that the act of answering a questionnaire about one's own risk preferences significantly alters strategic behavior. Within a best response correspondence framework, this result can be explained by a change in either risk preferences or beliefs. We find that self reporting risk preferences induces an increase in subjects' risk aversion while keeping their beliefs unchanged. Our findings raise some questions about the stability of strategy choices in coordination games. -- |
| Keywords: | coordination game,questionnaire,risk preferences,beliefs,best response correspondence |
| JEL: | D81 C91 C72 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kitwps:37&r=evo |
| By: | Tan, Fangfang; Xiao, Erte |
| Abstract: | This paper investigates how punishment promotes cooperation when the punishment enforcer is a third party independent of the implicated parties who propose the punishment. In a prisoner's dilemma experiment, we find an independent third party vetoes not only punishment to the cooperators but punishment to the defectors as well. Compared with the case when the implicated parties are allowed to punish each other, both the cooperation rate and the earnings are lower when the enforcement of punishment requires approval from an independent third party. |
| Keywords: | Social dilemmas; third party; punishment; cooperation; experiment |
| JEL: | D63 C92 C72 |
| Date: | 2011–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:35473&r=evo |
| By: | Luigi Luini; Annmaria Nese; Patrizia Sbriglia |
| Abstract: | Economists have often analysed the impact that the spread of beliefs and behaviors have on the equilibrium and performance of markets. Recent experimental studies on peer pressure in groups of agents interacting in investment and gift exchange games (Mittone and Ploner, 2011, Gachter et al. 2010) have proved that the imitation of partners’ behaviors can have substantial effects on reciprocity, thus confirming that the effects of information also need to be studied in games where social preferences play a fundamental role. The aim of this paper is to ascertain whether trust is affected by contagion and herding in small groups of trustors who can observe each other’s choices over time. We account for three important factors of trustors’ preferences,namely: risk attitude, generosity and expected trustworthiness. Using our data we test the basic hypothesis that an individual's propensity to trust recipients in the Trust Game can be affected by the observed behavior of other trustors. Our results confirm that trust is affected by contagion effects. Furthermore, we find that specific types of agents (generous or untrusting) more often imitate the same type, when positioned in the same group. Finally, we find that untrusting individuals are less affected by their peers compared to generous individuals, and they imitate less even when positioned in groups of agents who have the same characteristics. |
| Keywords: | trust game, experiments, social influence, imitation |
| JEL: | C72 C91 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:usi:wpaper:626&r=evo |
| By: | Viktor J. Vanberg |
| Abstract: | The claim that the Darwinian paradigm of blind-variation-and-selective-retention can be generalized from the biological to the socio-cultural realm has often been questioned because of the critical role played by human purposeful design in the process of cultural evolution. In light of the issue of how human purposes and evolutionary forces interact in socio-economic processes the paper examines F.A. Hayek's arguments on the "extended order of the market," in particular the tension that exists between his rational liberal and his agnostic evolutionary perspective. |
| Date: | 2011–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:esi:evopap:2011-19&r=evo |
| By: | Cobb-Clark, Deborah; Schurer, Stefanie |
| Abstract: | We use a large, nationally-representative sample of working-age adults to demonstrate that personality (as measured by the Big Five) is stable over a four-year period. Average personality changes are small and do not vary substantially across age groups. Intra-individual personality change is generally unrelated to experiencing adverse life events and is unlikely to be economically meaningful. Like other non-cognitive traits, personality can be modeled as a stable input into many economic decisions. |
| Keywords: | non-cognitive skills, Big-Five personality traits, stability, wages, |
| Date: | 2011–09–23 |
| URL: | http://d.repec.org/n?u=RePEc:vuw:vuwecf:1834&r=evo |
| By: | Wolfgang Buchholz; Josef Falkinger; Dirk Rübbelke |
| Abstract: | In small groups, norm enforcement is achieved through mutual punishment and reward. In large societies, norms are enforced by specialists such as government officials. However, not every public cause is overseen by states, for instance those organized at the international level. This paper shows how non-governmental norm enforcement can emerge as a decentralized equilibrium. As a first stage, individuals voluntarily contribute to a non-governmental agency that produces an incentive system. The second stage is the provision of a public good on the basis of private contributions. The incentive system punishes and rewards deviations from the norm for contributions by means of public approval or disapproval of behavior. It is shown that, even in large populations, nongovernmental norm enforcement can be supported in a non-cooperative equilibrium of utility-maximizing individuals. |
| JEL: | H41 K40 Z13 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:acb:cbeeco:2011-566&r=evo |
| By: | Bigoni, Maria (University of Bologna); Casari, Marco (University of Bologna); Skrzypacz, Andrzej (Stanford University); Spagnolo, Giancarlo (University of Rome "Tor Vergata" and Stockholm School of Economics) |
| Abstract: | When subjects interact in continuous time, their ability to cooperate may dramatically increase. In an experiment, we study the impact of different time horizons on cooperation in (quasi) continuous time prisoner's dilemmas. We find that cooperation levels are similar or higher when the horizon is deterministic rather than stochastic. Moreover, a deterministic duration generates different aggregate patterns and individual strategies than a stochastic one. For instance, under a deterministic horizon subjects show high initial cooperation and a strong end-of-period reversal to defection. Moreover, they do not learn to apply backward induction but to postpone defection closer to the end. |
| JEL: | C72 C73 C91 C92 D74 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:2088&r=evo |
| By: | Bonanno, Giacomo (University of CA, Davis) |
| Abstract: | We discuss a number of conceptual issues that arise in attempting to capture, in dynamic games, the notion that there is "common understanding" among the players that they are all rational. |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ucdeco:11-11&r=evo |
| By: | Junichiro Ishida; Chia-Hui Chen |
| Abstract: | A group of individuals, with a potential conflict of interest, face a choice among alternatives. There is a network externality such that the chosen alternative yields value only if sufficiently many individuals get on board. Their preferences for each alternative and the benefit derived from a successfully formed network are known only privately and might vary between the players who determine whether to make their choices early or late. We characterize the equilibrium timing of adoption as well as the efficient timing which maximizes the total expected payoff. We also show that the efficient timing of adoption can be implemented by a simple fee scheme. The analysis gives an insight into why consensus is often hard-won in some societies and suggests a potential role of social norms in improving the efficiency. |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:0826&r=evo |
| By: | Tsvetan Tsvetanov (University of Connecticut); Kathleen Segerson (University of Connecticut) |
| Abstract: | The economic models that prescribe Pigovian taxation as the first-best means of reducing energy-related externalities and argue that taxes are superior to energy efficiency standards are typically based on the neoclassical model of rational consumer choice. Yet, observed consumer behavior with regards to energy use and the purchase of energy-using durable goods is generally thought to be far from efficient, giving rise to the concept of the “energy-efficiency gap.” In this paper, we present a welfare analysis of Pigovian taxes and energy efficiency standards that is based on an alternative, time-consistent behavioral model. We adapt the model of temptation and self-control of Gul and Pesendorfer (2001, 2004) to the context of the purchase of energy-using durable goods. Our results suggest that (i) temptation or self-control might be a contributing factor in explaining the energy-efficiency gap, (ii) standards might be used as a commitment device to address inefficiencies in consumer choice that stem from temptation, and (iii) in the presence of temptation, a policy that combines standards with a Pigovian tax can yield higher social welfare than a Pigovian tax alone. |
| Keywords: | behavioral economics, temptation, self-control, time-consistent preferences, energy-efficiency gap, energy efficiency standards, Pigovian taxes |
| JEL: | D03 Q48 Q58 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2011-24&r=evo |
| By: | Matthew O. Jackson (Department of Economics, Stanford University, Santa Fe Institute, and CIFAR); Dunia López Pintado (Department of Economics, Universidad Pablo de Olavide) |
| Abstract: | We study how a behavior (an idea, buying a product, having a disease, adopting a cultural fad or a technology) spreads among agents in an a social network that exhibits segregation or homophily (the tendency of agents to associate with others similar to themselves). Individuals are distinguished by their types (e.g., race, gender, age, wealth, religion, profession, etc.) which, together with biased interaction patterns, induce heterogeneous rates of adoption. We identify the conditions under which a behavior diffuses and becomes persistent in the population. These conditions relate to the level of homophily in a society, the underlying proclivities of various types for adoption or infection, as well as how each type interacts with its own type. In particular, we show that homophily can facilitate diffusion from a small initial seed of adopters. |
| Keywords: | Diffusion, Homophily, Segregation, Social Networks |
| JEL: | D85 D83 C70 C73 L15 C45 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:pab:wpaper:11.14&r=evo |
| By: | Dominic Rohner; Mathias Thoenig; Fabrizio Zilibotti |
| Abstract: | We study the effect of civil conflict on social capital, focusing on the experience of Uganda during the last decade. Using individual and county-level data, we document causal effects on trust and ethnic identity of an exogenous outburst of ethnic conflicts in 2002-04. We exploit two waves of survey data from Afrobarometer 2000 and 2008, including information on socioeconomic characteristics at the individual level, and geo-referenced measures of fighting events from ACLED. Our identification strategy exploits variations in the intensity of fighting both in the spatial and cross-ethnic dimensions. We find that more intense fighting decreases generalized trust and increases ethnic identity. The effects are quantitatively large and robust to a number of control variables, alternative measures of violence, and different statistical techniques involving ethnic and county fixed effects and instrumental variables. We also document that the post-war effects of ethnic violence depend on the ethnic fractionalization. Fighting has a negative effect on the economic situation in highly fractionalized counties, but has no effect in less fractionalized counties. Our findings are consistent with the existence of a self-reinforcing process between conflicts and ethnic cleavages. |
| Keywords: | Conflict, trust, ethnic fighting, Uganda, social capital, identity |
| JEL: | D74 O12 Z1 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:054&r=evo |
| By: | Anna Contea (Max Planck Institute of Economics, Jena); Daniela T. Di Cagno (LUISS University, Rome); Emanuela Sciubbad (Birkbeck College, University of London) |
| Abstract: | In this paper, we focus on the analysis of individual decision making for the formation of social networks, using experimentally generated data. We first analyse the determinants of the individual demand for links under the assumption of agents' static expectations. The results of this exercise subsequently allow us to identify patterns of behaviour that can be subsumed in three strategies of link formation: 1) reciprocator strategy - players propose links to those from whom they have received link proposals in the previous round; 2) myopic best response strategy - players aim to profit from maximisation; 3) opportunistic strategy - players reciprocate link proposals to those who have the largest number of connections. We find that these strategies explain approximately 76% of the observed choices. We finally estimate a mixture model to highlight the proportion of the population who adopt each of these strategies. |
| Keywords: | Network formation, Experiments, Multivariate probit models, Mixture models |
| JEL: | C33 C35 C90 D85 |
| Date: | 2011–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2011-060&r=evo |
| By: | Gwenola Trotin (EQUIPPE); Amedeo Piolatto (Universidad de Alicante) |
| Abstract: | Prospect Theory (PT) has become the most credited alternative to Expected Utility Theory (EUT) as a theory of decision under uncertainty. This paper characterizes the optimal income tax and audit schemes under tax evasion, when taxpayers behave as predicted by PT. We show that the standard EUT results keep holding under PT, under even weaker conditions. Under fair assumptions on the reference income and on the utility function of taxpayers, we show that the optimal audit probability function is non-increasing and the optimal tax function is nondecreasing and concave. |
| Keywords: | Tax evasion; Income tax enforcement; Prospect theory |
| JEL: | D81 H26 K42 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasad:2011-24&r=evo |
| By: | Nicola Lacetera (University of Toronto at Mississauga - Department of Management); Mario Macis (Johns Hopkins University); Robert Slonim (University of Sydney) |
| Abstract: | We present evidence from a natural field experiment involving nearly 100,000 individuals on the effects of offering economic incentives for blood donations. Subjects who were offered economic rewards to donate blood were more likely to donate, and more so the higher the value of the rewards. They were also more likely to attract others to donate, spatially alter the location of their donations towards the drives offering rewards, and modify their temporal donation schedule leading to a short-term reduction in donations immediately after the reward offer was removed. Although offering economic incentives, combining all of these effects, positively and significantly increased donations, ignoring individuals who took additional actions beyond donating to get others to donate would have led to an under-estimate of the total effect, whereas ignoring the spatial effect would have led to an over-estimate of the total effect. We also find that individuals who received a reward by surprise were less likely to donate after the intervention than subjects who received no reward, suggesting that for some individuals a surprise reward adversely affected their intrinsic motivations. We discuss the implications of these findings for understanding pro-social behavior. |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2011-010&r=evo |
| By: | Ulrich Witt; Martin Binder |
| Abstract: | Although decision makers are often reported to have difficulties in making comparisons between multi-dimensional decision outcomes, economic theory assumes a uni-dimensional utility measure. This paper reviews evidence from behavioral and brain sciences to assess whether, and for what reasons, this assumption may be warranted. It is claimed that the decision makers' difficulties can be explained once the motivational aspects of utility ("wanting") are disentangled from the experiential ones ("liking") and the features of the different psychological processes involved are recognized. |
| Keywords: | utility, neuroeconomics, index number problem, wanting, liking, affective, forecasting |
| JEL: | D87 B41 B12 |
| Date: | 2011–12–22 |
| URL: | http://d.repec.org/n?u=RePEc:esi:evopap:2011-20&r=evo |
| By: | Dessí, Roberta; Zhao, Xiaojian |
| Abstract: | Evidence from psychology suggests that overconfidence is more important in North America than in Japan. The pattern is reversed for shame, an emotion that appears to play a more important role among Japanese than North Americans. We develop a model that endogenizes these differences, building on a tradeoff between the benefits of encouraging self-improvement and the benefits of promoting initiative and new investments. Overconfidence and high sensitivity to shame emerge as substitute mechanisms to induce efficient decisions. We identify the key equilibrium costs as well as benefits of reliance on each mechanism, and the implications for welfare. |
| Keywords: | cultural transmission; overconfidence; shame |
| JEL: | D82 D83 Z13 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8722&r=evo |